Best Buy Case Study

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Question #1
Best Buy Co., Inc. has become the leading international specialty retailer of consumer electronics. In order to determine its success within the consumer electronics retail industry and the overall business industry, we have to dissect several factors associated with the firm's external environment, which include its macro environment and the industry environment and its competitors analyses, which identifies the firm’s threats and opportunities. Within the macro environment, such factors include economic, demographic, political and legal, technological, socialcultural and global trends. Beginning with demographic and global trends, globalization, introducing one’s business internationally, has affected Best Buy by geographically distributing all over the world, especially developing countries. Best Buy, a company that was established in 1966, now has over 1,100 stores in the United States alone, which counts for 19% of the market. They also have a total of over 2,800 stores in Canada, Mexico, China, and Turkey and 2,414 European stores. Best Buy's acquisitions of the various brands have also been another factor contributing to their global awareness. In 2001, Best Buy acquired Future Shop Ltd., a leader in the electronics retail industry in Canada. Best Buy’s globalization continued in 2006 when they acquired 75% stake in Jiangsu Five Star Appliance. Ltd., that let them gain access to the Chinese retail market (Hoffman). Regarding other demographic and global factors within the external environment, China’s potential market growth is at 22%, the Middle East’s: 20%, and South America: 17%. The use of e-commerce also contributes to their global reach and success with the current and increasing age structure that involves internet users. Because of its convenience, more people have turned to online purchasing as a means to shop; some have become reliant. Income distribution is another factor in the demographic trend that currently raises a lot of attention because of the recent recession and unstable economy. Because Best Buy sells luxury items that are not necessities, it heavily relies on its customer service and specialized products to still cater to customers on a tighter budget. This is where economic trends come in with income decline and unemployment on the rise, Best Buy have also succeeded with the availability of credit card purchases and the customers’ ability to still purchase high-priced electronics in a time of distress that amounted to 16-18% in domestic revenue. Because Best Buy relies on their customer service being one of their competitive advantages, they invest a lot of time and money training all their employees so they’re familiar with changing technology. The company started off with commission-based income, but since it applied a lot of pressure, their wages have become competitive. This contributes to the technological trend and what Best Buy essentially stand for. A company that provides the latest technology has to quickly adjust to changing times. Since this has become an emerging trend, Best Buy has acquired Speakeasy, Inc., a provider of broadband, voice, data and information technology services and also Napster, an online provider of digital music. They’ve also utilized their online store as an alternative and acquired Geek Squad that provides residential and commercial product repair, support and installation services in-store and on-site. There also have been a few political and legal issues concerning price fixing and price matching (Hoffman, Rosenblatt). The issues involved their “price match policy” and their denial to satisfy customers with their alleged promotion and hidden “Anti-Price matching policy” that awarded employees to not guarantee customers a lower price on items. The “price fixing” case involved manufacturers to order a price fix that resulted in an antitrust claim and a decline in demand for electronics. This tarnished Best Buy’s core competitive advantage by...
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